Thursday, December 11, 2008

Labor Force Has Increased By 41% Since 1981, So Comparing Unadjusted Jobless Claims Is Distorted

NEW YORK (CNNMoney.com) -- The number of Americans filing new unemployment insurance claims jumped last week to a 26-year high, surpassing the number of filings economists had predicted. The Labor Department reported Thursday that initial filings for state jobless benefits surged to 573,000 for the week ended Dec. 6. That was an increase of 58,000 from a revised 515,000 claims in the previous week. It was the highest number of jobless claims since Nov. 27, 1982 when initial filings hit 612,000.

Comment: As the graph above shows, the U.S. labor force has increased from about 110 million in 1982 to about 155 million in 2008, an increase of 41%. That significant increase in the labor force means that an unadjusted comparison of initial jobless claims of 573,000 in 2008 to 612,000 jobless claims in 1982 will be distorted and biased.

The chart below corrects for the increase in labor force, and shows initial claims as a percent of the labor force. Based on that adjustment, the level of initial claims today is the highest since April 1991, not November 1982.So it's closer to a 16-year high on an adjusted basis, not a 26-year high as reported.

14 Comments:

On the first graph, since the scales are scewed & the graphs don't start at a common zero point on the y-axis, isn't the visual comparison there a product of scaling, and not a product of the two compared statistics?

You could compress the scale on the left even more so that the line representing jobless claims was basically a horizontal line, which crossed the total labor force line whereever you wanted it to, depending on where you set the zero point. Would that be a useful graph? It only differs from this graph as a matter of degree.The graph at the bottom of the post seems more helpful to me.

The point of the first chart is to show that the labor force (and the employment level and the overall population) has grown significanlty over the last 27 years by a factor of more than 40%. When looking at the number of jobless claims over time, we would expect it to increase as the size of the labor force increases. To look only at the unadusted number of jobless claims without adjusting for the increasing size of the economy and labor force is not as accurate as looking at jobless claims as a percent of total jobs or total labor force.

If the dual scale seems confusing, just imagine the labor force graph by itself (the red line), and you still get the same end result of a 40% larger workforce.

Damn Socialist, they certainly don't let logic, reason, or facts get in the way of their version of the "truth".

LOL..I'm always amused when Barak Obama claims that real wages have not increased in the last 8 years. He conviently leaves out the fact that the cost of most goods, and services decreased during this time period, thereby having a net gain in purchasing power for all Americans.

The original article never claimed that a higher percentage had filed for unemployment, but that a higher number had applied. The sad and serious fact remains that we have more persons unemployed than at any time since 1882 - no less a major problem - which was the only point of the report. . . . I wonder if those more than half a million people would feel much better knowing what the percentage is. . . .Nor does the percentage make it any easier to find jobs for all of them.

It appears like the work force in the US grew by 60% in 30 years (roughly), or 2% a year. This is the rate of wealth growth in the world since 1820 according to 'The Birth of Plenty' (William Bernstein).

Prof Perry scores again with common sense and facts. The lib media report from their template- doom and gloom, bash capitalism, bash conservatism. The economy is not that bad and will be growing again shortly with the massive tax cut we just rec'd due to gas price declines. And what credit crisis? a friend (admittedly with good credit) just got a $40K home improvement loan in about 7 minutes at his local bank. There is a credit crunch- for people with lousy credit. Listening to the media, you'd think the world has ended, and only their Messiah Lord Obama, Most Mericful can save us.

Good post. The percentage is more important than the absolute number. But fools put too much respect and trust to the idiots with liberal bias, lack of critical thinking and devoid of basic economics at the dying newspapers.

No wonder they are going down both in absolute numbers and as a percent of the population... :)

Mika did support his/her contention with government cost of living data.Yes, 1said, we can cherry-pick items that have come down in price, granted, but the COLA statistics seem to tell the overall story.

I have found myself very frustrated whenever I hear an 'economic commentator' discuss this issue. Thank you for addressing it here.

The inflation rate in the US has been on an upward trajectory for decades. You could argue with the magnitude of the increase on quality issues or that certain products disappear from the cpi but the fact remains it is increasing.

It is, of course, important to use the core CPI when making these comparisons as the CPI itself has volatile energy and food components. We have seen that with the fall in gas prices for example. It's one of the reason's it's the fed's preferred inflation rate.